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Mshwari is a new banking platform that enables customers to save, earn interest, and access small amounts of credit instantly via their mobile phones. Loan amounts depend on how much clients have saved in their MShwari accounts, as well as their...

The high cost of building and operating brick-and-mortar bank branches has been a major obstacle for extending financial services to the poor. Physical bank branches are expensive to maintain in far-flung communities, while traveling to urban areas is costly for many rural customers.

However, unbanked individuals are increasingly gaining access to financial services through digital channels. Banks, microfinance institutions, mobile operators, and third party providers are leveraging mobile phones, point-of-sale devices, along with networks of small-scale agents, to offer basic financial services at greater convenience, scale and lower cost than traditional banking allows. There are an emerging new sets of institutions such as agent network managers, payment aggregators and others who are helping build out a more far reaching and efficient digital finance ecosystem.

According to estimates, more than 400 million people are linked globally through basic mobile payments services, allowing them to send money, pay bills, or purchase prepaid electricity with greater ease, affordability and access (GSMA Global Adoption Survey, 2015). Increasingly governments are adopting digital finance to deliver social safety net cash payments and trying to make collection of fees/tariffs more efficient.

Yet there remains a long way to go in digital finance. Ecosystems take time to develop and can take years before one-quarter to a half of adults begin to use basic payment services. There are also barriers that hinder the progression from payments to solutions “beyond payments.” For instance, many payments services remain relatively closed, making the integration of a broader range of solutions into existing payment platforms costly and cumbersome. In addition, many financial services such as savings and loans require significant physical touch points between customers and providers, making them difficult to scale.

Recognizing these barriers, CGAP is working to explore how industry can leverage the depth and reach of existing digital payments platforms, and develop a broad range of financial solutions that are relevant for the poor. In particular, CGAP focuses on the following areas:

Open APIs seeks to support the development of open payments platforms that enable a broad range of providers to offer new solutions on top of the payment rails to the mass market.

Smartphone UI/UX explores how using an intuitive front-end interface can enhance the user experience, while effectively communicating relevant data and influencing customer behavior.

Data Analytics focuses on how financial service providers can operationalize digital data and advanced analytics in the provision of financial services to the mass market.

Digital Finance “Plus” explores how the digital processing of small-value payments can help extend critical services and utilities, such as clean water, health, energy, and education, to previously underserved communities.

Merchant Payments seeks to understand the pain points of merchants and consumers around retail transactions and to identify bottlenecks and opportunities for digital solutions to add value in retail payment ecosystems.

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Digital financial services (DFS) have grown considerably in emerging markets and developing economies, where they are instrumental for financial inclusion. DFS supervision needs to ensure that this expansion happens in a way that facilitates sustained, healthy financial inclusion.